Deadly derailment in Quebec fuels crude-by-rail concerns

The deadly July 6 explosion of a runaway crude-carrying
train in Quebec threatens to ratchet up scrutiny of rising
crude-by-rail shipments on both sides of the US-Canada border,
amid a boom in North American oil production.

In both
countries, shipments of crude by rail have shot up sharply, as
producers race to get all their new oil to market and as
pipeline companies scramble to build new lines or reconfigure
old ones to handle the growing volumes. Meanwhile, uncertainty
over several big pipeline projects -- including approval
delays for TransCanada Corp.'s Keystone XL, which would connect
Western Canada's booming oil sands development to the Gulf
Coast -- have sent some oil companies looking to rail as a
longer-term solution.

Canadian authorities confirmed 20 deaths after a
runaway train carrying crude derailed on July 6 and
exploded, demolishing a large swath of Lac Megantic, Quebec,
including as many as 30 incinerated buildings.

Investigators, citing the high death toll, have opened a
criminal investigation. Canadian regulators have said they are
concentrating their probe initially on the train, its braking
system and the track.

In the US, shipments of crude by rail have gone from 9,500
carloads in 2008, the year widely seen as the beginning of the
current oil boom, to 233,811 carloads in 2012, according to the
Association of American Railroads. A carload is typically about
740 barrels.

About 16.6 million bbl of Canadian crude were shipped by
rail to the US in 2012, accounting for about 2% of Canadian
crude exports, according to data from Canada's National Energy
Board. But industry estimates say that could grow to as much as
73 million bbl in 2013 and nearly 110 million bbl by 2014.

Canada, in particular, has been hit by a recent spate of
high-profile accidents involving trains -- several, but not
all, of which have been carrying petroleum. Last month, a
Canadian Pacific Railway freight train carrying petroleum
diluent derailed on a failing rail bridge amid record flooding
in Calgary, Alberta.

That accident was the fifth
derailment of a CP train in three months. The city's mayor
publicly questioned whether the company, which is responsible
for its own track and bridge inspections, put profits ahead of
safety. CP officials denied cutting corners on inspections and
said the derailments aren't connected to any underlying
trend.

But the recent accident is on a whole different
scale. The train's operator, Montreal Maine & Atlantic
Railway Inc., a unit of privately held US railroad operator
Rail World Inc., said the runaway train was loaded with 72
carloads of crude bound from North Dakota to a refinery in New Brunswick.

It had been stopped during a crew rest outside town. The
company said it inexplicably started to roll, unmanned, about 7
miles until derailing in Lac Megantic. The town has a
population of about 6,000 and is some 22 miles from the US
border with Maine.

In a statement, MM&A said an engineer inspected the
train and ensured one of its locomotives was running and that
its air brake was engaged. It said subsequent to that
inspection, the locomotive was shut down, which may have
released the brake. It didn't provide details but said it was
cooperating with investigators.

Rail accidents, particular large derailments involving
fatalities and spills, are relatively rare. The North American
rail industry's safety record has improved in recent
decades.

But the number of incidents involving crude shipments has
surged along with growth in North American oil production.
Industry executives say the number of spills is still tiny
compared with the amount of crude shipped.

"In the past decade, 95% of rail incidents involving crude
oil were... non-accident releases, and 70% of those incidents
involved spills of less than 5 gallons," said Holly Arthur, a
spokeswoman for the Association of American Railroads. The
Railway Association of Canada said 99.9977% of all products
shipped on the country's railroads arrive safely.

Most recent rail accidents involving crude have been small
-- such as the three gallons of oil that spilled from three
derailed tanker cars in central Maine on their way to the same
refinery in New Brunswick, in March.
But others have been more significant.

Crude shipments first started to make a noticeable
difference to BNSF Railway, one big crude shipper, in 2008. At
the time, it moved about 1.3 million bbl. In 2012 BNSF moved
about 90 million bbl.

In Canada, CP hauled 53,500
carloads of crude last year, up from 13,000 in 2012 and just
500 in 2009. Meanwhile, Montreal-based Canadian National
Railway Co. expects to double last year's 30,000 crude oil
carloads this year.

Traditionally, railroads are less attractive to oil
companies because of higher shipping costs compared with
pipelines. But the rapid development of new oil fields, from
West Canada through North Dakota and into West Texas in the
past five years, has production outpacing pipeline construction, leading many producers
and refiners to turn to rail, initially as a temporary fix.

But once seen as a temporary solution until new, permanent
pipelines could be built, rail usage has proved to be so
effective that many refiners have come to prefer the
railroad.

Even though pipelines are generally less expensive and less
prone to leaks and spills, rail offers refiners the ability to
bring in crude from different locations at different prices,
instead of being stuck with a single source of oil.

In Maine, crude has increasingly been shipped from Canada
and the US Midwest to an Irving Oil refinery in Saint John, New
Brunswick, raising worry there. Maine has seen crude by rail
shipments soar in the past two years from 14,300 bbl in January
2012 to 1.1 million bbl in December, most of it from
Canada.

Lac Megantic, the site of the July 6 derailment and
explosion, is some 22 miles from the US border with Maine. The
crude involved in the derailment there was scheduled to
traverse Maine on its way to the Irving Oil refinery.

The increased Canadian crude traffic has Maine
spill-response officials working with railroads to find
locations to stage spill cleanup equipment, and has led environmental groups to organize
protests and lobby state lawmakers for restrictions.

Last month, six people were arrested in Fairfield, Maine,
when they tried to block a train carrying crude bound from
Canada to Saint John.

Dow Jones Newswires

Have your say

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For more information on the many risks of shipping oil and other dangerous products by rail, see www.railroaded.ca.

P.R.Balasubramanian07.19.2013

I feel that the real solution to expedite the Pipelines for transpotation and in the interim period improve the safe guards to monitorinfg the train by telemetry so that the Engineer who had gone for lunch will get a beep on either the Engine shutdown,or the release of the brakes

Mike Rogers07.18.2013

Let's not understate the severity or the level of tragedy of this accident. There are 50 officially missing people. At present only 20 bodies have been found. Among the missing are a family of four with two young children who were vaporized in their beds when the runaway train exploded in front of their home.

John Galt07.18.2013

Hang the blame for this one on the Obama Administration and its holdup of Keystone and other key pipeline projects.

Library Shell Global Solutions07.18.2013

The number of missing people from this accident is officially set at 50. Only 20 bodies have actually been found, the rest apparently vaporized in the initial blast.

Robert Vance07.18.2013

The term "crew" in the above article is an overstatement. There was only a single locomotive engineer on the train and he had to leave when his hours of service expired.

CClemen07.18.2013

Pipelines are the final solution

RCampbell07.17.2013

The risk for accidents go up exponentially with weight and this was heavy.. Pipelines are a much safer answer. For me this was inevitable accident with all the crooked politicians concerned with payoffs rather than safety.